Tomei Consolidated Berhad's (KLSE:TOMEI) Shareholders Will Receive A Bigger Dividend Than Last Year

Tomei Consolidated Berhad (KLSE:TOMEI) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of June to MYR0.04. This takes the dividend yield to 3.0%, which shareholders will be pleased with.

Check out our latest analysis for Tomei Consolidated Berhad

Tomei Consolidated Berhad's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Tomei Consolidated Berhad was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 32.6% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.1% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from MYR0.02 total annually to MYR0.04. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Tomei Consolidated Berhad might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Tomei Consolidated Berhad has impressed us by growing EPS at 33% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Tomei Consolidated Berhad's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Tomei Consolidated Berhad (of which 2 make us uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.